Home ยป US recession 2022: Job markets are shifting again, layoffs – USA TODAY

US recession 2022: Job markets are shifting again, layoffs – USA TODAY

by Arifa Rana

Consumers have enjoyed the upper hand in the past year and a half, with a fistful of money, a pick of jobs, and great bargaining power. But those good times are about to end, some analysts warn. 
Despite surging inflation and economic contraction last quarter, many economists still mostly avoid recession talk. Instead, they focus on positives like strong consumer spending and savings and ample jobs.  But upon closer inspection, even those pillars are showing cracks, some say. 
“The tide has turned,” said Michael O’Rourke, chief markets strategist at JonesTrading. “Stagflation is a legitimate, if not likely, threat.” 
It’s true, consumer spending has continued to power the economy. When the economy unexpectedly shrank 1.4% last quarter, economists pointed to the 2.7% increase in consumer spending as a silver lining. Consumer spending accounts for about two-thirds of the economy. 
Travel industry executives also tout strong bookings for the coming summer season, showing that consumers are still “revenge spending,” or determined to spend no matter what the price to make up for time lost due to the pandemic. 
But how consumers are supporting that spending might be key. In March, the savings rate dropped to 6.2%, the lowest level since December 2013.  
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“Consumers are dipping into the savings amassed during the pandemic to keep spending afloat in the face of blistering inflation,” said Diane Swonk, chief economist at Grant Thornton. This is because wage increases haven’t kept pace with inflation. Average hourly wages rose 5.6% over the 12 months that ended in March, but consumer inflation jumped 8.5%
“The niggling worries are still there that as the cost-of-living squeeze intensifies and as savings are eaten away, there may be less appetite to pay for an easier life,” wrote Susannah Streeter, a senior investment and markets analyst with Hargreaves Lansdown, in a commentary. “With many supermarkets and restaurants set to pass on the cost of higher commodity prices, more consumers may begin to trim budgets by starting with little luxuries like on-demand delivery.” 
There are other signs a drop in discretionary spending may come sooner than later, too, especially if prices keep rising. The share of adults planning to book trips over the next year dipped slightly in March from February, according to the latest consumer spending survey by Morning Consult
“There are two competing forces at play: the pent-up demand driving “revenge spending” on categories like travel, versus growing concern about inflation and rising price sensitivity starting to impact discretionary purchases,” said Kayla Bruun, a Morning Consult economic analyst. “So far, the “revenge spending” seems to be winning out, but more recently – especially starting in March – we began to see signs that inflation concerns, and price sensitivity are starting to have more of an impact.” 
The Great Resignation – record numbers of people quitting in search of more flexibility, benefits, and higher wages – has been one of the biggest stories of the pandemic. For now, the job market still looks strong – April saw employers add 428,000 jobs, 38,000 more than Bloomberg’s mean estimate from economists. But that’s not likely to last either, some say. 
Amazon, the second-largest employer in the country, recently surprised analysts when it said it had over-expanded and now had too many workers and needs to cut costs. Other businesses like Netflix and Robinhood, which were highfliers during the pandemic, also announced layoffs. Meta, Facebook’s parent, ordered a hiring freeze. 
High demand and shortages everywhere forced a lot of businesses, including Amazon, to bulk up fast. However, with inflation high and demand likely to wane, more businesses will find that they also expanded too much and will start cutting back or not hiring at the same pace, O’Rourke said. 
“There are implications for a broad spectrum of the economy, from jobs to investments in transportation and equipment, warehouses and real estate,” he said “Most alarming is that Amazon is a company that usually gets it right.” 
This is likely to swing the pendulum back to employers. So people who are still playing musical chairs with jobs may end up without a chair, some warn.  
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“We have employees making “demands” of management regarding even coming back to the office,” said Matthew Matigian, chief executive at Blue World Asset Managers. So this shock “is what I am predicting will yield the re-set on people’s current expectation that higher-paying jobs will always be easy to find or that as an employee you get to take zero risk, have no responsibility yet somehow direct company policy.” 
Medora Lee is a money, markets, and personal finance reporter at USA Today TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

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